Central govt issues notification to bring PM CARES under CSR activity
The government has issued a notification with retrospective effect enabling the treatment of contributions made by companies to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund, formed in the aftermath of the coronavirus disease pandemic, as corporate social responsibility (CSR) spending.
Requests by some states, including West Bengal, to allow contributions made to the Chief Minister’s Relief Fund to be treated as CSR expenditure were declined, two officials aware of the matter said on condition of anonymity.
“It is because this will restrict the use of the bulk of CSR funds in only 6-7 industrialised states where most of the companies are located,” one of the officials said.
The notification to include PM CARES in Schedule VII of the Companies Act, 2013, related to CSR, along with the Prime Minister’s National Relief Fund, was issued on Tuesday. “This notification shall be deemed to have come into force on 28th March 2020,” it said. HT has seen a copy of the notification.
PM CARES Fund was set up on March 27 to deal with the coronavirus (Covid-19) pandemic. It announced its first allotment of Rs 3,100 crore on May 13 for ventilators, the welfare of migrant workers, and supporting a programme to develop a vaccine against Covid-19.
The official quoted above cited past instances wherein two industrial states--one in the north and another in south India--had tried to “arm-twist” companies located in their regions to spend their entire CSR money locally. “Such tendencies need to be curbed for equitable distribution of CSR funds across the country.”
HT on April 17 reported that West Bengal finance minister Amit Mitra wrote to Union finance minister Nirmala Sitharaman urging the Centre to include the CM’s Relief Fund in Schedule VII of the Companies Act.
The Companies Act requires firms with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more in the immediately preceding financial year, to mandatorily spend 2% of average net profit of the preceding three years on CSR.
Money earmarked for spending on CSR activities is about Rs 15,000 crore a year. According to an industry estimate, about Rs 50,000 crore has been spent on CSR since 2014-15 and around Rs 30,000 crore remains unspent.
A company’s board is empowered to plan, decide, execute, and monitor the activities under CSR on the recommendations of a committee. The government has specified broad areas of spending in Schedule VII.
Approved activities under CSR include eradicating extreme hunger, poverty, promotion of education, promoting gender equality and women’s empowerment as well as reducing the child mortality, improving maternal health and combating diseases. Ensuring environmental sustainability and prompting employment enhancing vocational skills are other activities approved under CSR.